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QUESTION:7[QUESTION BANK ID:269479]TYPE:MULTIPLE CHOICECORRECTFoley Systems is considering a new investment whose data are shown below. The equipment would be depreciated on a straight-line basis over the project’s 3-year life, would have a zero salvage value, and would require some additional working capital that would be recovered at the end of the project’s life. Revenues and other operating costs are expected to be constant over the project’s life. What is the project’s NPV? (Hint: Cash flows are constant in Years 1 to 3.) WACC10.0%Net investment in fixed assets (basis)$75,000Required new working capital$15,000Straight-line deprec. rate33.333%
Sales revenues, each year$75,000Operating costs (excl. deprec.), each year$25,000Tax rate35.0%<< HIDE ANSWERSA$23,852B$25,045C$26,297D$27,612E$28,993QUESTION:8[QUESTION BANK ID:269634]TYPE:MULTIPLE CHOICECORRECTDentaltech Inc. projects the following data for the coming year. If the firm follows the residual dividend policy and also maintains its target capital structure, what will its payout ratio be? EBIT$2,000,000 Capital budget$850,000Interest rate10% % Debt40%Debt outstanding$5,000,000 % Equity60%Shares outstanding$5,000,000 Tax rate40%<< HIDE ANSWERSA37.2%